Oilexco Completes Sheryl Appraisal Well in Block 21/23a

Oilexco has completed appraisal drilling on its 65% owned Sheryl oil accumulation located in Block 21/23a in the North Sea. This phase of appraisal drilling which commenced in early August consisted of 7 well penetrations from a single surface well bore. The last well bore was drill stem tested through sand screens under "open-hole" conditions. Oil flow during the test was recorded at a maximum rate of 1,915 barrels per day, through a 36/64" choke, at 334 psi flowing pressure. Oil flow was restricted by sand production throughout the flow period as a result of a damaged sand screen. The quality of the oil was 23 degrees API, which is consistent with other oil accumulations in the area. "Once all of the data we have collected has been properly assimilated, we along with our partner will decide the next course of action at Sheryl" said Arthur Millholland President and CEO. "We have collected a substantial amount of data on this oil accumulation. Our next step is to assess it, and explore potential development options".

Oilexco's Brenda and Nicol Field developments continue to move ahead as scheduled, with oil production expected to commence in early to mid-November. The Brenda manifold-subsea pump-control package and the Nicol control package have been installed on the seafloor. Subsea pipelining from the Nicol Field to the Brenda manifold (10km), and from the Brenda manifold to the Balmoral production facility (8 km) has been completed. Divers will now complete all the necessary hook-ups of the subsea equipment. Oilexco is monitoring contract negotiations involving unionized divers who have threatened strike action on November 1st if their labour dispute is not resolved. While the Company believes the situation involving the divers will be resolved before the November 1st deadline, it has developed contingency plans in the event of strike action by the divers. The subsea diving program has been scheduled so that oil production can commence from the Brenda Field initially. Production from the single well Nicol field would then commence after the settlement of the labour disruption, if it occurs.

The semi-submersible Transocean Sedco 712, which is under long term contract to the Company, will move to the Shelley prospect located on Block 22/2b to begin appraisal drilling later this week. The Company has a 100% ownership interest in the Block, which is located approximately 35 kilometers southeast of the Oilexco's Brenda Field. This Block was awarded to Oilexco in 2005's 23rd UK Offshore Licensing Round. Oilexco's appraisal effort will consist of a minimum 3 well cluster targeting oil in Paleocene Forties sand. These well bores will be located up-dip and along trend from the well 22/2-2 (1984), which flowed oil at rate of 2,416 bbl/day from 43 feet of net Forties sand oil pay. Block 22/2b also contains a deeper High Pressure/High Temperature Jurassic gas/condensate target which the Company will not drill at this time.